Chapter 16 The New Keynesian Macroeconomic Theory 友学经济学院
Chapter 16 The New Keynesian Macroeconomic Theory 0 10 20 30 40 90 91 92 93 94 95 96 97 98 99 00
Main dea .o Nominal Rigidity o nominal price rigidity o nominal wage rigidity Real rigidity ⊙ Real price rigidity ⊙ Real wage rigidity Unemployment, Economic Cycle and Policy Suggestion 友学经济学院
Main Idea ❖ Nominal Rigidity nominal price rigidity nominal wage rigidity ❖ Real Rigidity Real price rigidity Real wage rigidity ❖ Unemployment、Economic Cycle and Policy Suggestion
16.1 Nominal Rigidity o The origin of new Keynesian macroeconomic theory o Parkin first puts forward"new Keynesian theoryin 1984 ⊙ the economists include Mankiw、 Blanchard、 Fischer、Davd: Romer。 Because all these economists live near the coast, people often call them“sea” economists。 友学经济学院
16.1 Nominal Rigidity ❖ The origin of new Keynesian macroeconomic theory Parkin first puts forward “new Keynesian theory” in 1984 。 the economists include Mankiw、Blanchard、 Fischer、David ·Romer 。Because all these economists live near the coast ，people often call them “sea” economists
16.1 Nominal Rigidity o The character of new Keynesian theory O Accept the rational expectation"assumption of neoclassicism build models which include wage and price rigidity O To use all kinds of real economic faultiness( for example incomplete competition incomplete market, asymmetric information) to explain economic fluctuation o Because of price rigidity, money isn't neutral 友学经济学院
16.1 Nominal Rigidity ❖ The character of new Keynesian theory： Accept the “rational expectation” assumption of neoclassicism ， build models which include wage and price rigidity。 To use all kinds of real economic faultiness（for example ， incomplete competition、 incomplete market、 asymmetric information）to explain economic fluctuation。 Because of price rigidity ，money isn’t neutral
16.1 Nominal Rigidity nominal rigidity OThe level of nominal price or nominal wage can not be fully adjusted nominal price rigidity nominal wage rigidity 友学经济学院
16.1 Nominal Rigidity ❖nominal rigidity ： The level of nominal price or nominal wage can not be fully adjusted。 ❖ nominal price rigidity ❖ nominal wage rigidity
16.1 Nominal Rigidity nominal price rigidity o Market includes fixed price market and flexible price market Fixed price market includes labor market and commodity market and flexible price market includes finance market and small commodity market. Because there is no auctioneer in labor market, to frequently change wage will raise the cost of trade So it is not the best choice for a rational person and the exist of long term contract proves its advantage 友学经济学院
16.1 Nominal Rigidity ❖ nominal price rigidity Market includes fixed price market and flexible price market. Fixed price market includes labor market and commodity market； and flexible price market includes finance market and small commodity market .Because there is no auctioneer in labor market，to frequently change wage will raise the cost of trade. So it is not the best choice for a rational person, and the exist of long term contract proves its advantage
16.1 Nominal Rigidity LAS SAS(Wo) P SAS(W1) B A AD1 Y 友学经济学院
16.1 Nominal Rigidity P P0 P1 O Y1 Yn Y SAS(W0) LAS SAS(W1) AD1 AD0 A B C
16.1 Nominal Rigidity Nominal Price Rigidity ⊙ disadvantage The theory deduces a conclusion that real wage is reverse to the economic prosperity but this conclusion doesn't match with the real world。 友学经济学院
16.1 Nominal Rigidity ❖ Nominal Price Rigidity disadvantage： ❖The theory deduces a conclusion that real wage is reverse to the economic prosperity ，but this conclusion doesn’t match with the real world
16.1 Nominal Rigidity Nominal price Rigidity O Menu cost .Mankiw first puts forward this idea The menu cost results in the obstacle for price adjustment It includes not only the real cost of the adjustment price(for example, the expenses of printing the new quotation and the catalogue)but also the time cost such as negotiation Near rationality, In incompletely competitive market, if a firm, owning the price decision power, doesn't make the best choice in the process of deciding price, this action will produce the cost. This cost, however, may be very little, so the firm's inertia-price-decision behavior can be called"near rationality 友学经济学院
16.1 Nominal Rigidity ❖ Nominal Price Rigidity Menu cost ❖ Mankiw first puts forward this idea。 ❖ The menu cost results in the obstacle for price adjustment ❖ It includes not only the real cost of the adjustment price（for example, the expenses of printing the new quotation and the catalogue) but also the time cost such as negotiation; ❖ Near rationality; ❖ In incompletely competitive market, if a firm, owning the pricedecision power, doesn’t make the best choice in the process of deciding price, this action will produce the cost. This cost, however, may be very little, so the firm’s inertia-price-decision behavior can be called “near rationality
16.1 Nominal Rigidity -near rationality he best pro A Changing p TTO the constant profits in Maintaining price B C 二二2二22二二二_ llIllll Th impact of demand P 0 P TT1-112 is small, not change price is considered near rationa 友学经济学院
16.1 Nominal Rigidity ——near rationality P1 P0 P A B C π π0 π1 π2 The impact of demand the best profits in Changing price orders the constant profits in Maintaining price orders π1-π2 is small ,not change price is considered near rational